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By Jay Boehmer
Delta Air Lines last week added a new fare
class with the launch of Basic Economy,
which comprises the carrier’s “
lowest-priced fares” and does not allow refunds,
changes or advance seat assignments.
Basic Economy fares initially are available
to customers traveling between Detroit and
Orlando, Fort Myers, Fort Lauderdale and
Tampa but “may be expanded to other markets in the future as determined by Delta,”
the carrier noted on its website.
The main difference between Basic Economy and other advance-purchase, nonre-fundable economy fares is that ticketholders
cannot select their own seats.
Instead, Delta indicated that seats “will
be auto-assigned for Basic Economy fare
holders during check in.” That also goes
for elite frequent flyers, according to Delta,
which called the fare “ideal for travelers
who seek the lowest fare option, do not in-
tend to make changes and do not consider
seat choice an important part of their travel
experience.”
The new fare is available through GDS
channels, and Delta noted that they likely
would land at the top of fare search results,
especially for travel agencies and self-booking
tools that default to the lowest available fare.
This report originally appeared in Business
Travel News, a sister publication.
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Chairman and Chief Executive Officer Thomas L. Kemp
Chief Financial Officer Linda Li Davachi
Executive Vice President/Group Publisher Robert G. Sullivan
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Vice President, Product Development and Production Roberta Muller
Vice President, Content Licensing Sheila Rice
Vice President, I T Infrastructure and Operations Rich Mastropietro
Vice President, Database Products Elizabeth Koesser
BIDDING
Continued from Page 1
than the best available rates at hotel sites,
OTAs or metasearch sites like Kayak.
Reservations are fully refundable up to
three days prior to the stay, meaning that
Guestmob is more or less splitting the difference between refund-eligible customers who
know where they’re staying and customers
who won’t find out where they’re staying until after their refund period has expired.
Guestmob and Tingo join BackBid
among websites that try to rejigger the
room bidding process to offer potential customers discounted rates.
BackBid, launched late last year, essentially flips the opaque pricing model popularized by OTAs such as Priceline.com on its
head. Travelers enter reservation information such as dates, room rates and amenities
— but not the name of the hotel — on the
site, at which point participating hotels can
bid on the reservation by coming up with
more compelling offers.
The company, which collects revenue
through commissions from hotel reservations it generates, has said it’s more than just
a room-discounting site, because hotels have
the opportunity to swipe an existing reservation from a competitor by offering amenities such as free parking or meals, not just by
offering price cuts.
Like daily-deal sites
such as Groupon and
LivingSocial, BackBid
appears to be working
primarily in the independent, nonaffiliated hotel
sector. As such, they are
among an increasingly
crowded field of hotel-room distributors who are banking on a rising
tide of online hotel-reservation revenue.
At first blush, market data would appear
to support their optimism. Between 2009
and 2013, annual online U.S. hotel bookings from leisure travelers will have jumped
44%, to $39.2 billion, and will account for a
third of all hotel bookings, PhoCus Wright
predicted last November.
Henry Harteveldt, principal analyst at At-
mosphere Research Group, said, “Given the
state of the economy and that there’s too
much hotel supply and not much brand
loyalty, these sites have a chance.”
But he was quick to add that “their suc-
cess will be determined more by hotels than
by consumers.”
final price is determined only after a com-
peting hotel bids on an existing reservation.
An improving hotel market
Indeed, while a growing legion of travelers
is using the Internet to book hotels, an improving U.S. hotel market could work against
these sites because hotels might be less will-ing to drop their prices
and create discount opportunities.
Last year, revenue
per available room
(RevPAR) in the 25
largest U.S. markets rose 9.2% from 2010
on a 4.5% increase in average room rates
and a 4. 5 percentage-point increase in occupancy, according to Smith Travel Research (STR). In January, STR forecasted a
2012 RevPAR increase of 4.3%, almost exclusively on room-rate increases.
Meanwhile, PKF Hospitality Research
last month revised its 2012 RevPAR forecast
upward, to a 5.8% growth rate, and said average U.S. hotel room rates would advance
at least 4% every year
through 2014.
That means that with
higher occupancy rates on
the way, there’s a greater
chance for hotels to boost
prices during the days just
prior to a booking date
and a lower chance of
their dropping rates.
Carroll Rheem, a research director at
PhoCus Wright, said, “There are too many
hypotheticals, and in a marketplace that’s
improving, I don’t know how much you’re
really going to see prices go down.”
Rheem added: “All of this noise is just
that. People want simplicity in their model.”
Either way, getting a handle on BackBid’s
pricing relative to OTAs and other distribution channels is challenging because the
Hotels, not guests, are the bidders on BackBid.
